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Sephora: Company Analysis Report

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Updated: Jul 1st, 2021

Executive Summary

The report revolves around Sephora, one of the leaders in the beauty retail market. The main reason for selecting the company is its stable positions in the sector, the use of multiple innovative and effective strategies, and successes in working with clients and distribution of products.

The paper consists of the introduction, outlining the central goal of the work, the background, that offers the history of the brand, the body, containing the most important aspects of the brand’s functioning, and a conclusion, summarising all findings and emphasising the critical importance of the brand for the beauty market.

The document contains critical information about the peculiarities of the selected market segment vital for the understanding of its importance. Moreover, it provides information about Sephora’s target audience, its services, positioning, creation of the appropriate environment, and improvement practices that are employed by the firm with the primary goal to create the world-class service and continue its growth. There is also data about distribution channels and their peculiarities, which is essential for the in-depth analysis of the brand.

Altogether, the report contributes to the improved understanding of Sephora, its vital characteristics, vital features of the firm’s functioning, and strategies that are employed to work with clients, distribute products, and contribute to the achievement of success in long and short term perspectives.

Introduction

The presented report revolves around Sephora, and outstanding multinational chain personal care and beauty stores. There are several factors that justify the selection of the given company for the analysis. First, the beauty market is one the rise today and generates stable revenue that attracts attention to it. The increase in the level of income among various population groups, along with the demand for diversity and unique goods, creates a positive environment preconditioning the emergence of many firms working in this very sector.

At the same time, Sephora remains one of the leading brands with a loyal target audience and high revenues, which evidences the effectiveness of strategies employed by the brand. For this reason, the paper presents the analysis of the basic aspects of the company’s functioning, such as its relations with clients, peculiarities of products and positioning, pricing strategies, distribution channels, work with costs, service improvement, and ROI management. At the end of the paper conclusion summarising all findings is given.

Background

Sephora company was created in Paris in August 1969 and was later acquired by Dominique Mandonnaud in 1993 who established a new brand selling his own perfume (About us, n.d.). The successful evolution of the firm can be explained by the introduction of the idea of assisted self-service that differentiated it from other companies working in the same market. It turned out to be a great success that set the basis for the further rise of the organisation. In the 1990s, the development of Sephora continued, and in 1997 it was sold to LVMH and transformed into a global brand offering beauty and cosmetic products in various areas (LVMH, 2018).

In 2007 it accepted the decision to enter the Middle Eastern market because of their promising character and multiple opportunities. In 2018, Sephora was a brand with many retail locations in North America, including the USA and Canada, South America, and many other important regions (About us, n.d.). Today, it remains one of the leaders in the sphere of beauty and care with a stable position in the specific market segment.

Products, Consumers, Markets

The analysis of the company should be started with the investigation of the critical features of any brand’s functioning, such as its products, consumers, and markets. The comparison of the given elements with other companies and their evaluation will help to understand the peculiarities of the firm and how its success is achieved. At the moment, Sephora is characterised by the existence of a specific target audience, unusual products, and a significant presence in the selected market. For this reason, it manages to succeed and remain one of the leaders if to compare with other companies. Moreover, it includes multiple brands that are also nowadays associated with Sephora.

Market

Prior to the analysis of the company, it is vital to outline the characteristics of the market and Sephora’s place in it. Today, the beauty industry has an estimated value of about $532 billion and is expected to grow at a compound annual growth rate of 7,14% from 2018 to 2023 (Cvetkovska, 2019). Sales revenue in the makeup industry managed to achieve $8.1 billion in 2018 and is predicted to continue its growth (Cvetkovska, 2019).

For this reason, the given segment remains attractive for multiple actors as they are interested in the generation of revenue and employment of the positive trends peculiar to the market. Sephora holds stable positions in the given industry as it demonstrates about 9% growth and the ability to compete (CB Insights, n.d.). Comparing its showings with other companies, it is possible to conclude that the brand remains competitive and contributes to the evolution of the beauty industry in various areas where it works.

Products

The company has a wide range of products that are offered to clients at the moment. There are more than 300 brands such as NARS Cosmetics, Amazing Cosmetics, Lancome, and many others that propose differentiated items to clients regarding their needs and current demands (LVMH, 2018). As against its closest rivals such as Macy’s, Nordstrom, and Ultra Beauty, the given retail store tries to cooperate with the multiple suppliers and brands to ensure that a client who comes to a shop can select from the diversity of products that can meet his/her demands (Sephora competitors, n.d.).

At the same time, there is a focus on high-quality and premium products that can satisfy clients with the middle and high income and help them to create a unique and recognisable image (LVMH, 2018). Sephora tries to spread its impact to multiple regions, which also impacts is products’ diversity. In such a way, this element serves as one of the factors facilitating the evolution of the brand.

Consumers

One of the major success factors of the company is the correct choice of the target audience that contributes to the evolution of the brand and its empowerment. Sephora mainly focuses on women under 34 years who care about their appearance and have an income of over $125,000 (Statista Research Department, 2019). The primary target market also includes females with no children and more than high school education (LVMH, 2018).

In such a way, the brand focuses on clients old enough to wear makeup and, at the same time, experiment with new products. At the same time, the secondary target market includes men from 20 to 40 and women from 35 to 50 who look for high quality and diversified cosmetics that can be used on a daily basis (Statista Research Department, 2019). The given approach differentiates it from other companies as the cooperation with clients with these features guarantees that the brand will benefit from the high level of income and be able to create new innovative approaches to makeup that will be accepted by clients.

In such a way, analysis of these factors shows that Sephora has an advantageous position in the market due to the focus on a specific target audience and the employment of existing trends in the given market segment. These elements precondition the following evolution of the brand.

Type of Consumers

Because of the critical importance of consumers for the development of any brand, their detailed analysis is one of the pivotal tasks of the brand’s analysis. As stated in the previous section, Sephora mainly focuses on women of middle age with a significant level of income and interest for various products. Thus, to understand this factor better, the current needs and demands of women to beauty products should be discussed. First of all, today, women with stable income have a set of specific requirements for items they use every day. They should be high-quality, safe, effective and free from adverse effects (Stewart, 2018).

Moreover, today there is a rising eco-friendly trend presupposing that the cosmetics should not be tested on animals and its production should not cause or cause minimal harm to the environment (). These unique aspects of clients’ demands should be considered by a brand that wants to be successful, and the main Sephora’s feature differentiating it from rivals is the ability to take these elements into account.

Resting on the information provided above, and the peculiarities of the brand, it is possible to conclude that Sephora mainly focuses on loyal consumers who correctly realise the nature of the company, products it offers, and are ready to pay for them. The focus on loyal clients is an important part of the firm’s growth strategy as it guarantees that their level of income will remain stable, and the company can introduce new experimental goods that will be discussed by buyers and appreciated by them (Danziger, 2018).

Needs of Sephora’s consumers presuppose high-quality products of recognised brands that can be used in daily care and for the creation of a unique and appreciated image. These aspects are considered by the firm in its attempt to create an effective strategy and guarantee its further evolution and development.

Positioning

The positioning of products is another vital element of the work of any company as it helps to compete with other firms by attracting increased clients’ attention to offerings. In this regard, Sephora utilises an unusual approach that allows to generate a competitive advantage. It positions its services both via the physical and online channels offering clients the opportunity to use them both (Forte, 2017).

The advertising campaign emphasises the fact that its products are innovative and high quality. Moreover, there are unusual elements such as virtual try-on, allowing to test products by using the mobile device that detects some facial features and offers pieces of advice on how to use various items (Honigman, n.d.). It helps to generate a competitive advantage and improve the brand’s positioning, which is vital for further evolution and its becoming one of the leaders in the selected market segment. Additionally, tight connection with the community helps to promote offered goods and popularise them among the target audience.

Promotion of Service and Products

Another essential part of working with clients is the promotion of service and products in ways that contribute to the formation of specific attitudes in consumers’ minds. That is why Sephora performs multiple activities to create a strong association between the concept of beauty and the brand (Stewart, 2018). It offers various beauty classes for individuals who come to the company’s store to become aware of the products and services if offers and learned how to use them.

At the same time, this strategy helps to promote all offerings created by the firm as interacting with various items, clients generate the desire to use them in real life. In such a way, Sephora utilises a practical approach to popularising its beauty products and familiarising the representatives of the target audience with them (Honigman, n.d.). It contributes to the stably high interest to the brand and the positive image of its offerings as clients acquire improved information about them.

Distributing Services

Distributing channels of a company play a critical role in its functioning as they provide opportunities for the delivery of products to clients and their sales. For this reason, being a multinational and powerful brand, Sephora devotes specific resources to the utilisation of all available channels to achieve the desired goals and preserve the high level of income. At the moment, the brand uses both physical and electronic channels to distribute items and stay connected with their clients. The employment of both channels guarantees that the brand will benefit from the innovative technologies and social media that are an integral trend of the modern world and also will be able to use traditionally powerful physical approaches.

As for the electronic channels, Sephora has a specific strategy that helps to succeed in this sphere. First, the company uses shopper data to implement the retail and mobile experience vital for the increase in sales (Hopp, 2019). The brand conducted its own market research and discovered that today individuals mainly use their smartphones during shopping at the retailer’s locations (LVMH, 2018).

This cohort of individuals looks for outside recommendations, products’ reviews, other customers’ experiences, and pieces of advice when determining whether to buy a product or not (Stewart, 2018). Accepting the importance of this trend, Sephora aims at the improvement of its Internet presence by giving clients an opportunity to try its products, share their experiences, and encourage other customers to buy them (Hopp, 2019). It helps to promote the electronic distribution channel and create a positive image of the brand.

At the same time, social networks are also employed as a potent tool to popularise the company’s products and to develop social commerce incentives. In uses Instagram as a powerful distribution channel that has a wide variety of opportunities to cooperate with clients, discuss new products, and offer them to various groups. In such a way, Sephora devotes much attention to this aspect of its functioning.

As for the physical distribution channels, the company has a traditionally effective strategy that ensures the aligned work of the supply chain, customer service, inventory control, and transportation. Sephora is focused on the continuous improvement of customer experience, which means that the brand tries to reduce the effort and time needed to buy a particular good (LVMH, 2018).

Under these conditions, the physical distribution channels are constantly improved by using new suppliers, engaging in cooperation with new brands, and evaluating the needs of clients to ensure that they are provided with items they need at the moment. At the same time, the firm also functions in various countries, which improves its ability to provide clients with goods they need and guarantee that the physical distribution channel will preserve its importance and create the basis for the further development of the firm.

Capacity Management and ROI

Capacity management of any company helps to guarantee that available information technology resources are right-sized and can meet existing and future demands in the most effective way (Kotler and Keller, 2015). For Sephora, it succeeds in this field due to the provision of unique customer experience. For instance, the brand utilises Dynamic Yield, a platform designed for the personalisation of clients’ impressions and feedback (Sephora personalizes beauty, n.d.).

It helps to customise product recommendations, improve existing digital channels, and introduce necessary changes to remain relevant and enhance capacity management. Due to the adherence to this paradigm, Sephora is expected to achieve about 6X ROI (return on investment) (Sephora personalizes beauty, n.d.).

It evidences that the organisation tries to optimise this aspect of its work by monitoring the state of the demand and updating its information resources to avoid unnecessary spending or ineffective cost strategies. Additionally, the personalised approach helps to introduce prices that are welcomed by the target audience as there is reliable data about this factor. At the same time, the company manages its revenue in ways that help to create the basis for further growth. In other words, the current approach presupposes consideration of spending and income to create the cost-saving model promoting the rise of the brand.

Service Marketing Communications

The given aspect of the company’s analysis is closely connected to the previous one. Communication is a vital component of the work of any company that tries to empower its positions and remain informed about the latest tendencies. For this reason, Sephora uses various service marketing communications that contribute to the increased effectiveness of its strategy and its ability to meet brands’ demands. Much attention is devoted to advertising of numerous types and sales promotions. Using social networks, the Internet, TV, and fashion magazines, the company forms the recognisable image that is expected to attract clients and increase income (LVMH, 2018).

The company also organises multiple events such as shows, classes, and exhibitions to popularise products it sells to individuals. The interactive marketing platform is also employed by Sephora as it offers innovative solutions such as virtual try-on and tours to familiarise individuals with all available offerings (Stewart, 2018). In such a way, the brand effectively uses all service communications and manages to attract attention to its work.

Design and Implementation of Service Products

The success of the selected company, to a greater degree, depends on the design and implementation of service products. In Sephora, there is a specific innovation lab responsible for the creation of new offerings, their testing, analysis, and discussion. This department is responsible for supporting the brand’s strategy of delivering interactive beauty technology to meet all clients’ needs. In such a way, there is a team of specialists whose main duty is the analysis of the existing demand on products and the creation of plans regarding the introduction of new items with characteristics welcomed by the existing target audience.

This approach ensures that all current expansion options will be considered, and the company will benefit from the appearance of new products appreciated by clients. Implementation of new services has a similar approach as all fresh ideas are tested and discussed with clients to avoid misunderstandings and ensure the future rise.

Balance between Demand and Capacity

Sephora is also one of the companies that manage their resources effectively to avoid overproduction and excessive waste. To be able to meet the constantly growing demand of its clients, the brand makes several steps. First, it continuously develops its monitoring and data collection tools. For instance, Sephora is using Dynamic Yield to investigate the demand and acquire the complete image of the basic peculiarities of its target audience (Sephora personalizes beauty, n.d.).

It helps to plan the creation of new products and their introduction into the market. Second, the company analyses the clients’ feedback with the primary goal to determine the most demanded commodities and focus on their production, at the same time to reduce the amount of items that are not so popular (LVMH, 2018). Finally, the brand investigates the market and its current trends to be one of the leaders in offering innovative or rising products that would be interesting to its clients. The adherence to this strategy helps to avoid overproduction and guarantee that there is a balance between demand and capacity, which is critical for the future rise.

Service Environment and its Evaluation

One of the main goals of the analysed company is to offer an outstanding service environment for its clients for them to acquire a positive experience and the desire to come here again. One of the brand’s features is the creation of the interactive service environment (Agnew and Copeland, 2019). It means that all clients should have an opportunity to try offered products, consult with specialists working in retail stores, and use applications that help to select the most appropriate goods (Agnew and Copeland, 2019).

The given approach contributes to the creation of a positive and friendly atmosphere that promotes desired buyer behaviours and encourages customers to use these services again. At the same time, Sephora evaluates the results of the given approach by comparing alterations in sales regarding the application of a certain interactive strategy (CB Insights, n.d.). Additionally, feedbacks and impressions of the target audience are also taken into account to introduce appropriate changes.

Services and Plans to Manage People

Sephora also employs a unique approach to managing service and people. First, all employees working for the company are required to follow a specific code that contributes to the generation of particular advantage. They should wear professional makeup to demonstrate the benefits of products and be prepared to provide all knowledge related to distributed goods (Raga, 2017). At the same time, as far as the company plans to continue its growth, it also introduces new approaches to managing people.

First, they are attracted by an outstanding opportunity of career growth as they can start from a shop assistant and end as one of the top managers (Raga, 2017). Second, the brand provides discounts and enhanced opportunities for employees to try new services and evaluate them. Moreover, clients are also engaged in planning activities as their desires and demands are considered by using feedback tools (LVMH, 2018). In such a way, Sephora tries to avoid stagnation by planning new services and managing people effectively.

Loyalty

Relations management, creation of the positive image, and achievement of desired loyalty levels are critical components of the strategy employed by Sephora. To increase clients’ loyalty and devotion, it introduces multiple programs that provide specific discounts for customers who regularly buy in its stores (Forte, 2017). Additionally, they are first to know about new offerings and new products that might be interesting to them (Forte, 2017). A specific system is used to monitor the preferences of an individual and offer him/her the most desired or appropriate goods. It helps to manage relations and build loyalty. At the same time, the given strategy contributes to the better allocation of resources and better ROI.

Complaint Handling Mechanisms and Service Improvement

Sephora’s customer service also includes an effective complaint handling mechanism that creates the basis for the improvement and guarantees the preservation of the positive image of the company. A client that has some issues might contact with the representatives of the company by using phone, email, chat or address a shop assistant in an appropriate facility (About us, n.d.). All complaints are analysed by the team to ensure that there are no unsolved problems, and individuals are satisfied with the quality of the provided services. Problem-solving mechanisms presuppose replacement of a product that is issued, provision of specific discounts, or communication with a customer to understand the causes of his/her problem better.

These tools can also be considered a potent means of service quality improvement. Regarding the total quality management, there is a need for constant cooperation with clients to introduce small alterations on continuously (Kotler and Keller, 2015). For this reason, Sephora is ready to reconsider some of its practices and services if they do not suffice and cannot meet clients’ demands for diversity or quality at the moment. It helps the brand to assess its current state and determine if any improvement is needed.

World-Class Service

Finally, being a global leader in selling beauty products, Sephora is interested in the creation of world-class service for it to be recognised in various areas as an example of a beauty brand. For this reason, it devotes much attention to the creation of its image via media and focus on service (LVMH, 2018). Diverse needs of clients serve as the source of constant improvement with the primary goal to establish a world-class service and demonstrate its clients that they hold privileged position when they cooperate with the brand.

Conclusion

Altogether, the given report shows that Sephora is one of the leaders in the sphere of beauty products. Its correct understanding of the peculiarities of market, the provision of the high-quality and premium goods, and the proper understanding of clients’ needs because of the attention to their feedback and experiences contribute to the creation of the basis for constant improvement and establishment of world-class service that helps the brand to evolve and remain a significant force in the discussed market segment.

Reference List

About us (n.d.). Web.

Agnew, H. and Copeland, H. (2019) ‘,’ Financial Times. Web.

CB Insights (n.d.) . Web.

Cvetkovska, L. (2019) . Web.

Danziger, P. (2018) ‘,’ Forbes. Web.

Forte, D. (2017) . Web.

Honigman, B. (n.d.) . Web.

Hopp, D. (2019). 12 weird (but true) facts about Sephora. Web.

Kotler, P. and Keller, K. (2015). Marketing management. 15th edn. New York, NY: Pearson.

LVMH (2018) . Web.

Raga, S. (2017) ‘,’ Smart Shopping. Web.

Sephora competitors (n.d.). Web.

Sephora personalizes beauty (n.d.). Web.

Stewart, K. (2018). ‘,’ National Retail Federation. Web.

Statista Research Department (2019) . Web.

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